It’s a well-established fact that the financial services industry is populated by an older workforce. Yet, executives and observers are divided on whether the issue of an aging advisor base constitutes a serious problem.

On one hand, many firms continue to be successful in attracting recruits and retaining them over the long haul.

“We’re not experiencing any trouble finding or keeping new advisors,” says Charyl Galpin, senior vice president and chief operating officer with Toronto-based BMO Nesbitt Burns Inc. She doesn’t believe the wider financial services business is suffering under the bur-den of bringing in the next generation of advisors.

Other industry insiders, however, feel that the advisory business has collectively put its head in the sand when it comes to the issue of who will take over advisors’ businesses as the wave of baby-boomer advi-sors scale back or retire.

“The industry is seeing the problem,” says Neil Ouditt, national director of the associate advi-sor program for the independent advisor channel with Toronto-based Manulife Financial Corp. vin Windsor, Ont. “But is it doing something about it? I would say no, not really.” Manulife, parent of Manulife Securities International Ltd., which was surveyed in the 2008 Dealers’ Report Card, has taken a proactive approach to developing young advisors, he adds.

In Investment Executive’s annual Report Cards, IE surveyed 1,930 advisors and found that the average age of advisors was relatively steady, at about 47. But almost 75% of those surveyed were more than 40 years old, with just 6% under the age of 30.

Part of the problem is that most industry executives prefer hiring and training a 30- or 40-something recruit who is approaching the advisory business as a second or third career — as opposed to a raw rookie in his or her 20s who has little in the way of either business or life experience.

“Hiring green advisors and training them has just not been a successful model,” says Joe Canavan, chairman and CEO of Toronto-based Assante Corp. “For us to take that approach, it would probably be a money-losing venture.”

Assante doesn’t recruit anyone with less than $20 million in assets under management, Canavan says, because the failure rate for advi-sors who manage less than that is very high.

On the other hand, the banks, large wealth-management firms such as Winnipeg-based Investors Group Inc. and some of the insurers can afford to hire young recruits because these firms have the size and resources to pay for training rookies en masse, Canavan says. And a low retention rate doesn’t necessarily bother or affect those firms because the clients of failed advisors end up being transferred to senior advisors internally, he adds. In the end, the company benefits, despite the high cost of training advisors.

In addition, the ongoing trend of consolidation within the industry will leave the industry with a smaller number of firms, Canavan believes. And those surviving firms will be the ones doing the overwhelming majority of the hiring and training of rookie advisors.

“Those firms will have big enough brands for young advisors to come up and build a professional practice,” Canavan says. “It’s very difficult [for new recruits] to go from a standing start today, with zero assets, to building a significant professional practice without a powerful brand acquiring those assets.”

Even if a firm doesn’t have a rookie recruiting program, most firms, as does Assante, do have a junior or associate advisor program in which the company will help a senior advisor train and mentor a young person brought onto the senior advisor’s team in a supporting role. During the course of several years, the associate will develop until he or she is ready to take over a part or all of the senior advisor’s business. At that point, companies will often step in to help the younger advisor buy the senior advisor’s book of business.

However, some observers believe that the industry suffers from the fact that an ambitious person in his or her mid-20s is effectively blocked from hitting the ground running. Instead, he or she must spend years in supporting or apprenticeship roles at a bank branch or a financial planning firm.

“For the most part, the brokerages want you to be in your 30s [before taking you on]”, says Roberta Wilton, president and CEO of Toronto-based financial services education provider CSI Global Education Inc. As a result, there’s a gap — roughly, between the ages of 25 and 30 — in which young people might drift away and pursue other careers rather than stick it out in the advisory business, she says: “We’re losing some of the best and brightest.”

@page_break@But the good news is that many young people remain interested in the advisory business, Wilton adds, pointing out that CSI, which administers the Canadian securities course among other programs, trains thousands of Canadians each year. “We still have a very healthy pipeline of new people coming into the industry,” she says, adding that the career of being a financial advisor is still a “popular choice.”

And industry consensus likewise suggests that young people continue to be interested in the industry. Nesbitt executives say that firm receives 1,200 to 1,500 applications each year for its rookie training program, from which it selects slightly more than 100. According to the brokerage’s figures, after five years, it retains 50% of the advisors in its rookie program.

In fact, firms throughout the advisory industry are becoming more selective in choosing candidates to develop and train. The changing realities of the business, including the high expectations of ever more sophisticated clients and the fact that many firms are increasingly focused on serving affluent and high net-worth clients, are leading companies to be extra choosy when it comes to hiring new recruits.

“Clients in this day and age are very demanding of their advisors,” says Terry Hetherington, national sales manager of the independent employee channel with Raymond James Ltd. The Toronto-based brokerage does not have a rookie program, but it does help advisors in training associates as part of a succession plan. “It’s very, very difficult for rookies in this business.”

That wasn’t the case 30 years ago. At that time, a new advisor with a university degree, his or her securities licence and little else could start working right away. But there are many more steps these days, in terms of educational and training requirements, before an advisor can sit in front of a client. “The bar has gone up,” Wilton says. “It’s not a deterrent for new advisors, but it may lead to some dropping out. These are not easy programs. A lot of people are eliminated along the way.”

Still, many industry executives say that as long as there’s new blood coming in, they’re not worried about an aging advisor base. “We still consider ourselves pretty young,” says Charlie Spiring, chairman and CEO of Winnipeg-based Wellington West Capital Inc. “We’re really big into partnerships and mentoring. So, a lot of our older brokers, 55 and up, are partnering with juniors. And that will solve that problem.”

Firms that do hire rookies have, over the years, established comprehensive training programs to help develop new advisors. Recruits usually get both in-class training, including support in completing required regulatory courses, and in-branch experience. They are also put into a mentoring partnership with a senior advisor, receive peer support in the form of periodic “reunion” meetings with other rookies, have benchmarks that they must attain and develop a wide variety of practice-management skills.

Yet, many believe, the financial services industry is now just playing catch-up after years of not focusing on finding the next generation of advisors. “We, as an industry, got away from recruiting because we had a strong, solid base of advisors,” Ouditt says. “We didn’t put an emphasis on bringing in new, quality people.”

Ouditt adds that many firms don’t put enough focus on coaching and teaching new advisors the so-called “softer” skills, such as how to build a business, manage relationships and establish centres of influence. And, he believes, the many advisors who fail do so because of a lack of these skills rather than a lack of product knowledge or other technical skills.

“We train advisors on how to relate to people,” Ouditt says of Manulife’s program. “We train the advisor to do the right thing for the client and to get to a common objective together.”

One channel of the industry that has been relatively more successful in recruiting new advisors is the banks and credit unions at the branch level. These are the advi-sors that help millions of ordinary Canadians with financial planning and investment advice. According to the advisors at bank branches surveyed by IE, 38% are under the age of 40.

Even so, executives in this channel of the industry say they have to work hard to find good young candidates for advisory positions. “It used to be that three-quarters of our new hires came from external sources,” says Jim Lund, national program director of the investment solutions network for Toronto-based Bank of Montreal. “As financial institutions have expanded their sales forces, the gene pool out there is getting a little thin.”

In response, BMO has developed an in-house program that includes hiring administrative support for its in-branch financial planners, Lund says, adding that these new hires represent the next generation of the bank’s planners.

Canada’s major credit unions are also in the midst of building out a robust wealth-management offering after years of largely ignoring this line of business. But they, too, are finding it difficult to find new advisors.

“It’s a struggle to find people who are interested in this business,” says David Lanphear, assistant vice president of investment services at Envision Financial in Abbotsford, B.C. “We can have a plan [to build wealth-management services], but if we don’t have any people to help with the plan — that’s the problem.”

Envision, which currently employs 33 advisors, actively approaches good candidates among their staff members to suggest the advisory role as a possible career, Lanphear says.

One thing that industry executives do agree on is that the industry must continue to find new advisors to make sure that it can continue to provide Canadians with financial advice and to ensure retiring advisors will have suitable people to whom to pass on their books of business.

“The average age of our advisors is getting close to 52,” says Vince Valenti, president of Ottawa-based Independent Planning Group Inc. “They’re not [retiring] yet, but they’re getting themselves ready for that inevitable time.” IE